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Children's magical explanations and beliefs were investigated in 2 studies. In Study 1, we first asked 4- and 5-year-old children to judge the possibility of certain object transformations and to suggest mechanisms that might accomplish them. We then presented several commonplace transformations (e.g., cutting a string) and impossible events (magic tricks). Prior to viewing these transformations, children suggested predominantly physical mechanisms for the events and judged the magical ones to be impossible. After seeing the impossible events, many 4-year-olds explained them as “magic,” whereas 5-year-olds explained them as “tricks.” In Study 2, we replaced the magic tricks with “extraordinary” events brought about by physical or chemical reactions (e.g., heat causing paint on a toy car to change color). Prior to viewing the “extraordinary” transformations, children judged them to be impossible. After viewing these events, 4-year-olds gave more magical and fewer physical explanations than did 5-year-olds. Follow-up interviews revealed that most 4-year-olds viewed magic as possible under the control of an agent (magician) with special powers, whereas most 5-year-olds viewed magic as tricks that anyone can learn. In a third study, we surveyed parents to assess their perceptions and conceptions of children's beliefs in magic and fantasy figures. Parents perceived their children as believing in a number of magic and fantasy figures and reported encouraging such beliefs to some degree. Taken together, these findings suggest that many 4-year-olds view magic as a plausible mechanism, yet reserve magical explanations for certain real world events which violate their causal expectations.